Inflated Claims in North Carolina Budget Battle

A conservative group omits some important details in a TV ad attacking North Carolina’s lame-duck Democratic governor and praising the Republican-controlled state General Assembly during a partisan budget battle.

The ad says the legislature added state funding for “2,000 more teachers” and that its budget “adds teachers.” But the legislature’s increased funding didn’t make up for the loss of federal money and discretionary state funds that local districts use to hire teachers. The state had a net loss of about 900 teachers overall.

The ad says the governor called for a $1-billion tax increase, but that depends on how you look at it. She called for extending a temporary 1 percent sales tax increase that had been in effect for two years — but at a reduced level of 0.75 percent.

A website created by the group to support the ad campaign uses inflated figures to claim the legislature returned $2 billion to state taxpayers by rejecting the governor’s proposed budget. The group arrives at that figure by making faulty assumptions. The actual number is closer to $1.3 billion.

Our thanks to John Totten of Port Charlotte, Fla., who uploaded the video to our Spin Detectors website, through which we ask our readers to help us monitor political claims and campaigns across the country. Totten sent us the video because he has family in North Carolina who look to him to check out claims for spin, often referring them to FactCheck.org.

Dallas Woodhouse, state director of AFP-NC, said the group plans to spend $500,000 running the 30-second television ad, a similar radio spot and the website. The ad campaign advocates for the Republican-led General Assembly version of the 2011-2013 biennial budget, which the legislature passed into law after overriding Perdue’s veto.

Perdue’s proposed budget (see page 11) sought a continuation of the sales tax increase to supplant declining revenues and to help pay for teaching positions. The legislature let the tax hike expire. The governor and the state Assembly are preparing to address the budget again to make adjustments for fiscal year 2012. Perdue proposes to restore the sales tax increase while accusing the legislature of making “extreme” education cuts. Shortly after AFP-NC began running its television ad, Perdue embarked on a statewide tour to make her case for the sales tax increase. Woodhouse said the public is being bombarded with misinformation. But AFP’s attempt to educate North Carolinians fails to offer the whole story.

AFP-NC TV Ad: [The North Carolina General Assembly] even added state funding for 2,000 more teachers. Now there’s more work to do. But a balanced budget that adds teachers is delivering North Carolina real solutions.

To check the “2,000 more teachers” figure, we went to the North Carolina Department of Public Instruction website that AFP cites to support its claim on its “Fact Check Our Ad” webpage. It’s true the number of state-funded teachers increased this school year by 2,057 — from 78,963 to 81,020. And the state Assembly allocated more than $60 million (see page F-1, section B. 5) to pay the salaries of 1,124 more elementary school teachers this school year to reduce class sizes. But overall, North Carolina saw a net loss of 915 school teachers — from 94,879 to 93,964.

The number of locally funded teachers decreased by 320 — from 4,473 to 4,153. School district officials have blamed layoffs on the state, which reduced the amount of discretionary funding it sends to schools by $429 million (see page 2 under “flexibility”). The current state Assembly is responsible only for part of the reduction, cutting $124 million. Perdue and the then-Democratic-controlled General Assembly implemented recurring reductions in the previous budget, resulting in an additional $305 million cut this year.

Schools have been using federal stimulus dollars to supplant the losses in state funding. But federal funds have been diminishing, too. The number of federally-funded teachers fell this school year by 2,652 — from 11,443 to 8,791.

The website accompanying the ad makes a broader claim, stating that the General Assembly added a total of 4,600 state-funded education positions, a figure that includes teachers, administrators and employees such as teaching assistants. Again, that’s true but not the whole story. The number of state-funded education positions climbed from 125,981 to 130,594. But all education positions dropped even more — by 4,840 — from 180,470 to 175,630.

Woodhouse said AFP has been critical of schools using one-time federal funds, such as stimulus money, to pay educator salaries only for that money to diminish. He said the increase in state-funded teachers is helping to return education funding to where it should be. But his argument isn’t made in the ad or on the website — possibly leaving folks with the impression that the state has more teachers. It doesn’t.

Billion Dollar Claims

AFP-NC TV Ad: Who can afford a billion-dollar tax increase in times like these? Governor Perdue thought we all could, but hard working families like ours said ‘no.’

The ad claims the governor called for a $1-billion tax increase, but that depends on how you look at it.

Last year, Perdue proposed (see page 11) continuing a temporary sales tax hike that was enacted in 2009 (see page 19) and was set to expire in 2011. Her proposal called for a continuation of the increase but at a reduced rate of 0.75 percent — down from the 1 percent passed in 2009. The rate was projected to generate nearly $1.7 billion over two years. In the same budget, Perdue proposed reducing the corporate income tax rate from 6.9 percent to 4.9 percent, lowering corporate taxes $418 million over two years. Accounting for the proposed decrease in corporate taxes, Perdue’s budget would’ve raised nearly $1.3 billion more in broad-based tax revenue between 2011 and 2013.

The ad’s supplemental website claims the General Assembly returned $2 billion to North Carolina families between 2011 and 2013. But AFP comes to that number by assuming taxes and tax rates from 2010 would’ve continued unchanged in fiscal years 2011 and 2012. That’s not what Perdue was proposing. She called for extending the sales tax increase at a slightly lower rate. AFP also assumes that Perdue wanted to continue a temporary income surtax (see page 19) on corporations and individuals. But her budget would’ve let that tax expire in 2011. (The General Assembly’s final budget let the surtax expire as well).

As we stated earlier, Perdue’s proposed tax increase would’ve amounted to nearly $1.3 billion in broad-based tax revenue over those two years. It’s a stretch to say the General Assembly returned more than that by passing its own budget.